The Pillar Two GloBE rules will have the status of a common approach. As such, members of the Inclusive Framework (IF) are not required to adopt them (ie they are not compulsory), but, if they do, they will implement and administer the rules in a way that is consistent with the outcomes provided for under Pillar Two.
Members of the IF are required to accept the application of the GloBE rules applied by other members, including agreement on the rule order and the application of any agreed safe harbors.
Both the IIR and UTPR will need to be implemented through domestic legislation. The OECD does, however, raise the possibility of the development of a multilateral instrument to facilitate the coordination of the GloBE rules that have been implemented by IF members.
The STTR, as a treaty-based rule, can only be implemented through bilateral negotiations and amendments to individual treaties or as part of a multilateral convention.
The OECD provides that members of the IF that apply nominal corporate income tax rates below the STTR minimum rate will implement the STTR into their bilateral treaties with developing country members of the IF when requested to do so.
A model treaty provision to give effect to the STTR is planned be released in 2022, along with a multilateral instrument for its implementation.
The original timeframe was that Pillar Two should be brought into law in 2022, with the IIR coming into effect in 2023 and the UTPR in 2024.
The OECD published Model GloBE rules in December 2021 and Commentary in March 2022. The OECD will also address the issue of how the GloBE Rules will co-exist with the US GILTI rules.
The OECD will also produce a detailed implementation framework, focusing on administrative, compliance and coordination issues. This is currently subject to a public consultation.
On December 20, 2022, the OECD issued the Safe Harbours and Penalty Relief: Global Anti-Base Erosion Rules (Pillar Two), which includes details of two safe harbours and penalty relief for the Pillar Two GloBE rules.
The European Commission released a Proposed Directive based on the model GloBE rules on December 22, 2021. Once approved, EU Member States will be required to transpose the final version of the directive into domestic law for implementation in 2024.
This was originally held up by Poland. They later relented but Hungary then raised objections in June 2022.
On June 30, 2022, the French Finance Minister announced that Pillar Two will be implemented with or without Hungary.
On September 9, 2022, Germany, France, Italy, Spain and the Netherlands issued a joint statement stating that if agreement is not reached on Pillar Two in ‘the next few weeks’ they will push forward domestic implementation of the Pillar Two GloBE rules ‘by any possible legal means’ in 2023. Belgium subsequently announced it is willing to participate in the enhanced cooperation procedure to implement Pillar Two GloBE Rules.
On December 12, 2022, the EU issued a press release stating that ‘the ambassadors of EU member states decided to advise the Council to adopt the Pillar 2 directive, and a written procedure for the formal adoption will be launched.’
On December 15, 2022, the Council of the European Union formally adopted the EU Pillar Two directive. Member states will have to transpose the directive into national law by the end of 2023.
On December 22, 2022 the EU Global Minimum Tax Directive was published in the EU official journal as Council Directive (EU) 2022/2523 of 14 December 2022. Date of entry into force: 23 December 2022.
Use our Pillar Two Tracker to keep up to date with the latest developments.
| Country | Implementation | Analysis |
|---|---|---|
| United Kingdom | The UK published draft legislation for the Pillar Two GloBE rules (which it calls the ‘Multinational Top-Up Tax‘) in July 2022. | A Review of the UK Draft Pillar Two Legislation |
| South Korea | On December 31, 2022, South Korea passed Law 19191 to amend the International Tax Adjustment Act to provide for the Pillar Two Global Minimum Tax from January 1, 2024. On July 22, 2022, South Korea released a draft law to implement Pillar Two. | First Domestic Pillar Two Global Minimum Tax Law Enacted Analysis of South Korea’s Draft Pillar Two Law English Translation of South Korean Pillar Two Law |
| Switzerland | On August 17, 2022, the Swiss Federal Council issued a draft decree for the implementation of Pillar Two. | Analysis of Switzerlands Draft Pillar Two Decree |
| EU | The European Commission released a proposed directive based on the model GloBE rules on December 22, 2021. On December 15, 2022, the Council of the European Union formally adopted the EU Pillar Two directive. Member states will have to transpose the directive into national law by the end of 2023. On December 22, 2022 the EU Global Minimum Tax Directive was published in the EU official journal as Council Directive (EU) 2022/2523 of 14 December 2022. Date of entry into force: 23 December 2022. | Review of the Draft EU Pillar Two Directive Poland Withdraws its Veto and the EU Pillar Two Directive is Adopted |
| Netherlands | The Netherlands Published draft legislation for Pillar Two on October 24, 2022. | Key Takeaways From the Dutch Draft Pillar Two Legislation |
This website is not affiliated with or related to the OECD. We provide independent insights and analysis on the OECD Two-Pillar Solution
© 2023 OECDPillars
All Rights Reserved
